Mortgage interest rates have increased rapidly over the past year. SuisseKasse, a financial and retirement advisory firm from Seegräben ZH, accounts for around 2.5 percent for ten-year fixed-rate mortgages. This is based on the benchmark interest rates of the top 50 credit institutions as stated in a statement.
And that’s not all: interest rates are likely to rise further in 2023. This situation bothers many property owners.
Increased costs with lower property values
The problem lies not only in the more expensive construction and acquisition financing, but also in the debt that remains at an increasing rate and after the fixed period has expired. SuisseKasse Managing Director Jasin Işık explains: “When calculating the affordability of a property, the operating costs of the property and the income of the owner are compared. When mortgage interest rates rise, this affordability is recalculated.”
This means that while the remaining debt increases due to the higher interest rate, more income must be generated at the same time.
Light says there is a risk of foreclosure by the mortgage lender if the financial resources are not high enough. And at a significantly lower revised price. Also, by law, the mortgage lender can claim the outstanding mortgage debt within 30 days.
In the face of such scenarios, some property owners, who calculate their housing purchases very tightly, are afraid. But here the question arises whether General Manager Işık is exaggerating.
How justified are the concerns?
Of course, the property can be sold voluntarily to circumvent the problem. Property prices are still high right now. There is no widespread decline in housing prices.
And when will rising mortgage rates really become a financial problem for Swiss households? Normally, banks use a mortgage interest rate of five percent to assess affordability.
This means that a homeowner who has recently made mortgage contracts should still be able to bear a five percent mortgage interest rate. We are still a long way from that right now. Sources in the industry do not yet believe that mortgage interest rates will rise significantly above three percent in the near future.
Selling or risk?
“People don’t always want to sell the property and prefer to accept the risk,” says Işık. That’s fine, but it must go hand in hand with examining the entire retirement situation.
If the pension fund or column 3a assets were already used when purchasing or building the property, there may be enormous financial constraints in old age, even if the property is still affordable in principle.
There have been signs of a slight slowdown in the real estate market for several months.
Opportunities for the next generation
But there is also good news. If you did special preparation in Column 3a when you were young, in a few years you may be able to buy a property for a much lower price than it is now.
“In this scenario, on the one hand, the owner can withdraw the 3a money early to finance the property used and thus have more equity, on the other hand, the financing requirement can be minimized,” says Işık. (rae/dvo)